Got Money Market? Too Bad.

[Jan. 27, 2010 (Bloomberg) “Treasury one-month bill rates turned negative for the first time in 10 months, as issuance declines while investors seek the most easily-traded securities amid a renewal of risk aversion.
The rate on the four-week security dropped to negative 0.0101 percent, the lowest since it reached negative 0.015 percent on March 26. The Treasury sold $10 billion of four-week bills on Jan. 26 at a rate of zero percent, the second auction of the securities in three weeks at zero percent. Winning bidders will receive no interest on their investment.]

Think about what this means. When big investors invest short term money in T-Bills, they will receive less money back than was invested just 30 days ago. This tells us that the investor is more concerned about getting the money back than they are about making money on the money. The investor is essentially paying a small fee to insure that his cash is returned with little loss (30-day T-bills can be considered riskless since the Govt. can print money to honor the claim).

Think about the signal from big investors that is being given here about the perception of systemic risk and the probability of systemic failure. The rate on 30-day bills went negative for quite some time before the collapse of Lehman and AIG.

This phenomenon only strengthens the case that investors should be putting as much as they can into gold and silver as vehicles for protecting and preserving wealth. When you own gold, you are not subjected to, and victimized by, the bad decisions and moral hazards being implemented by our policymakers, many of whom are puppets for the big banks who fund their positions of leadership (see today's Congressional inquisition of Geithner and Paulson).

When you own physical gold in your own possession (or a trusted custodian), your investment does not have any risk of counterparty claim AND you have no Government/SEC restrictions placed on your investment, like the SEC regulation just passed.

I will end with a quote from none other than the king of fiat money, Alan Greenspan, who said on September 9th, 2009: "Gold still holds reign over the financial system as the ultimate source of payment."

Keep this in mind when you get your next investment statement from your broker or advisor." ZeroHedge.com

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Dear Fellow Investor:

I don't know how much you rely on Money Market Funds for emergencies. And, I have no absolute knowledge if a such a hinted at crisis is coming, or when…, But somehow I'm willing to bet there'll be one if The Powers That Be take this kind of a "precaution."

I'm also willing to speculate that there could be a shut-down of the banking system sometime in the future accompanying a money market meltdown.

Hopefully such American events will be brief…week(s) or so, but maybe not. We've seen major destruction of investor assets in Venezuela, North Korea and Argentina in recent months. Iceland has collapsed. Greece's credit rating is on the verge of junk. Our Congressional and FED Quantitative Easing strategies are set to expire in March with no indication that the economy is about to actually recover on its own. England has a failed bond auction. The Chinese have stopped buying our Treasuries. The Treasury Department removed the caps on funding Fannie Mae and Freddie. Government tax receipts and employment are still dropping…etc.

If you're concerned about an outlier MMF sieze up occurrence even as a remote possibility, and you're not going to buy physical gold or silver, you might want to take a look at Central Fund of Canada (CEF).

CEF is a Canadian closed end fund mutual fund trading on the NYSE that buys gold and silver bullion. It's selling for a little over $13 a share, now that gold is having a rather normal but annoying correction - down to about $1075 an ounce. CEF's current price is a slight premium over the value of the gold and silver. (The fund's silver holding is 40 times the gold bullion ounces.) This particular closed end fund has almost never traded at a discount, but sometimes the premium is over 50% above the net asset value of their metals.

CEF is has been in existence since 1961; is audited; and carries insurance in case of trouble. (The American gold ETF (GLD) carries neither.) CEF is the easiest way to buy actual physical bullion I know of. (There is also Jim Turk's fund, www.goldmoney.com , run out of London.)

Anyway, IF we get a crisis, and money market funds get into trouble, but you have money in CEF, you can sell it and before your money is "swept" into your now one-way money market fund, you can get cash for emergencies.

(CEF gains, if any, may be taxed at regular income rates (28%)

As they used to say on the TV show Hill Street Blues, "Be careful out there."

Financial Foghorn